Looking Back At The Haynesville Shale - A Retrospective
From time to time, I reflect on the history of the Haynesville Shale Play. From inception until now, it encompasses my entire mineral career. I owe thanks to many who have helped me along the way especially my best friend, Randy Davidson, an outstanding O&G attorney and the finest man I've every called a friend. His legacy lives on through the attorneys that he trained and that I work with to this day. He is sorely missed by us all.
Recently I have mentioned the consolidation of proven HA/BO acreage into the hands of fewer and larger companies and what that means for the play's future. Prior to the emergence of the Haynesville, the Cotton Valley was the major play that drove O&G activity in NW LA. A number of companies were here chasing the Cotton Valley when the Haynesville land rush began. Some companies were lucky to have existing operating areas that turned out to be prime Haynesville rock. Chesapeake and Petrohawk come first to mind because of their aggressive push to lease up acreage especially that which was a "bolt on" to their existing areas.
Much of the crazy competition for leases can be attributed to two men, Aubrey McClendon at Chesapeake who announced the Haynesville Shale and other unconventional shale plays in April 2008 and Floyd Wilson at Petrohawk who competed with McClendon and helped to drive up lease costs for all the companies looking for a place in the play. Aubrey started the public competition for leases by raising the stakes to a quarter royalty regardless of a tract’s acres and then quickly an escalating bonus competition that Floyd finally topped with a public bid for south Caddo Parish tracts of $30,313 per acre. Astoundingly, his bid for those tracts included a 30% royalty. That signaled the end of the period of outrageous lease offers as Petrohawk lost its primary lender, Lehman Brothers, in the financial market crash of 2008.
For those interested in what was going on prior to the public announcement of the Haynesville Shale, I recommend my blog post, Chronology of the Early Haynesville Shale Play in Northwest Louisiana. Encana and Chesapeake were the early movers. For those who missed it or may care to read it again, here is a link:
https://gohaynesvilleshale.com/profiles/blogs/chronology-of-the-early
With the exception of Encana's joint venture partner SWEPI (Shell Western Exploration and Production Inc.), all the early Haynesville focused companies were smaller independents or minor semi-majors. Some were fortunate to have their operating areas in good Haynesville rock and some missed out completely. For the unfortunate, Devon Energy comes to mind. And for those with small operating areas who chose to sell out and seek other opportunities instead of spending like drunken roughnecks for additional leasehold, EOG Resources comes to mind. Enron Oil & Gas went on to pioneer horizontal drilling and hydraulic fracture stimulation for oil in other basins when that was thought to be a risky move. EOG turned out to be the most successful smaller independent unconventional focused operator and grew into a much larger company that continues to be a leader today.
The oil and gas industry has a long history of Mergers and Acquisitions (M&A). The larger companies acquire the assets of smaller companies and smaller companies are often those that explore more risky or unproven formations hoping to make a discovery that vaults them higher up in the O&G world or makes them wealthy when they sell. Those larger publicly traded O&G companies more often than not are cash rich and have lower levels of debt to value than the smaller companies. They are fine with letting the independents take the risks and reap the rewards when they swoop in to acquire a proven or prospective asset.
The Haynesville/Bossier Shale has matured and has gone through a lot of M&A cycles over its life. Many companies have come and gone. The proven fairway now is operated by only a few significant operators. The advantages of scale bring business advantages that are important in a future that likely includes fewer natural gas price spikes and a lower average price per mcf over time. Those advantages include consolidated acreage that facilitates longer lateral wells, the ability to lower costs for field operations and supplies and leaner corporate operations. The result of these changes may mean the end of natural gas prices above $4/mcf long term but fewer periods below operators’ break-even costs per mcf.
To help jog our memories of where the play has come from to where it is today, I offer a flow chart of the Haynesville operating companies. I know I have left some out so feel free to chime in with those companies that you remember.
Expand Energy Aethon Comstock BPX PALOMA
Chesapeake Southwestern Tellurian Covey Park BHP Billiton Goodrich
Goodrich* GEP Haynesville Samson Contour BEUSA (Bridas) Petrohawk
Matador* Encana Anadarko EOG Operating
Vine/Brix J-W Operating Forest Oil
SWEPI Questar (QEP)
El Paso (EP Enrgy)
*Goodrich and Matador were existing CV operators that partnered with Chesapeake on their early wells. Chesapeake provided the field management and drilling and completion experience for both companies. Matador moved on to oil focused basins and Goodrich sold off their Haynesville assets piecemeal to a number of different smaller independents.
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Replies to This Discussion
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Permalink Reply by dbob on
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Thanks Skip.
Thinking back to a number of early play maps, there is probably a great article to be written about how the potentially productive acreage is defined down to the actually productive acreage. Some of us (me included) expected it to be economically productive over a wide area. We also didn't expect Henry Hub prices to stay lower for longer.
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Permalink Reply by Skip Peel - Mineral Consultant on
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You're welcome, dbob. I forgot Vine's partner, Brix. The play has morphed many times over sixteen years. I remember when poor Chesapeake wells condemned 300,000 acres across north Caddo and Harrison County and had to eat it when they couldn't find a buyer. I think a good bit of that acreage ended up productive. Trinity has certainly drilled further north in Caddo than I expected and Harrison County has a fair amount of Haynesville production. The only portion of the main fairway that has proven to be a failure is the Logansport Low Porosity Zone. If GEPH II and Ensight IV make economic wells in the Zwolle Field, I'll be surprised and that would be a big step out for the fairway.
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Permalink Reply by Skip Peel - Mineral Consultant on
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I am updating one of my tracking spreadsheets and may have to move BPX out of one of the top spots as Paloma has acquired a good many of BPX's HA Units. BPX (British Petroleum) does not prioritize their HA assets. Mineral lessors could do better with Paloma as an operator. I would be interested to hear from those in Paloma units as to their experiences with the company.
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Permalink Reply by olddog573
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Ive been bummed with the CHK buyout of SWN. CHK had sold our acreage to Indigo and that was a welcome relief in regard to deductions on payouts. Then Indigo sold to SWN and SWN was really good to work with and now of course we are back with CHK/Expand. And we had Vine which is now CHK/Expand. As soon as we get back in the frying pan we get kicked back into the fire with CHK/Expand. We had a section expire so now we have it with Paloma and they are drilling it. Will be interesting to see how they are.
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Permalink Reply by Skip Peel - Mineral Consultant
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olddog, I think that drilling wise, Paloma (PNG) is technically and financially capable. I'm curious as to how they treat their mineral lessors, UMOs and surface owners. We all hope we are not headed back to the bad old days of Chesapeake.
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Permalink Reply by Jimmy Hamiter on
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Thank you Skip for posting this. Very informative!
Based on past and more current history, how much potential is there in DeSoto Parish? Specifically my interests are in the Spider Field.
Thanks again!
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Permalink Reply by Skip Peel - Mineral Consultant
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You're welcome, Jimmy. I like the Spider Field, good Haynesville and good Bossier rock. The field is split about equally between EXE (Chesapeake) and Comstock. Comstock appears to have more well permits in the field currently but I haven't reached Spider yet in my spreadsheet review. Drilling has slowed all over the fairway with the very low natural gas prices. DeSoto is the only LA parish that has good shale across most of the parish. The exception is what I call the Logansport Low Porosity Zone. Basically 11N-16W, 15 W and the western half of 14W. East and south of there is more good rock. You're better off in Spider. Good luck.
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Permalink Reply by Skip Peel - Mineral Consultant
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I suggest that those that follow the Haynesville Shale play closely familiarize themselves with Paloma Natural Gas (PNG) as they continue to grow their asset base and become a more prominent operator in the Play.
Paloma Resources is a Houston-based private oil and gas company. Founded in 2004, Paloma is backed by the financial strength of EnCap Investments and Macquarie Americas.
https://www.encapinvestments.com/https://www.encapinvestments.com/
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VG initial post in this thread Skip that def. brought back some memories since I landed here. That said the PNG mention is timely as they recently started fracking the 2 ROBNSN wells I have an interest in as they’ve been DUC’s since 23Jan & sorta hopeful w/ almost $3.00mcf they TIL both when the frac op’s are completed.
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Permalink Reply by Skip Peel - Mineral Consultant
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Good luck, MB. Hope the TIL timing is good.
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Thanks Skip!
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Permalink Reply by Lawrence Silver -
Thanks, Skip, for this information. I get a request every week to buy my minerals (all in the Spider field) and I've been holding out. Glad to know I'm on the right track.
Lawrence
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